Rangers mid-term accounts delayed. Why?

It has been brought to my notice that the release of Rangers’ mid-term accounts has been delayed.

When a company delays their accounts it is almost always a sign that all is not well.

Murray International Holdings (MIH) delayed their accounts in 2009.  As we now know to be true, all was definitely not well in Rangers’ parent company.

The 2009 accounts for MIH revealed that it had effectively defaulted on its debt repayment, and a debt for equity swap was required to prevent technical insolvency.  More recently, Lloyds’ private equity arm has taken 160 million convertible preference shares in MIH giving them what will likely amount to total control.  The bank effectively owns MIH, and MIH owns 85% of Rangers.

Part of tidying up the mess at MIH involved getting rid of ‘phantom assets’, such as the loan from MIH to Murray Sports Limited, a completely separate company created to collect investments to fund Rangers’ spending binges of a decade ago.   An essential part of any turnaround is establishing transparent accounts and realistic asset values.  However, MIH’s balance sheet cannot be fully transparent until the absurdity of the valuations applied by Rangers to Ibrox and Murray Park are also addressed.  (Every pound of net assets on Rangers’ balance sheet will now show up as 85p on MIH’s).  So it is possible that the delay in publishing Rangers’ accounts is related to a major write-down of asset values at the club.

In their last annual report, the book value of Rangers FC’s tangible fixed assets was listed as £121million.

Assets can be valued in a number of ways.  Normally, the original cost is used and the value of buildings is reduced each year through depreciation to provide a conservative estimate of net worth.  The current market value could also be used, and the independent experts I have consulted have estimated that the land value of Ibrox is somewhere between £2 million and zero.  (Much is made of the Class B listed building that is the main stand at Ibrox.  ‘Class B’ listed buildings can be demolished, but there is a cost and time delay involved).  Rangers’ surveyors provided a valuation based upon ‘depreciated replacement cost’ which is supposed to estimate the cost of replacing the assets using currently available technology and subtract for wear-and-tear and lack of maintenance.  It does look odd that Celtic were able to reproduce functionally-equivalent assets in the same city that have a book value of £65 million less than those of Rangers.

Industry insiders have noted Rangers’ asset revaluations with raised eyebrows for some time.   The increased valuations of Rangers’ properties coincided, of course, with the need to support increased borrowing which reached a peak of £81 million in 2004.

One wonders what Lloyds must make of a situation which they inherited when press-ganged by the UK government into taking over HBOS.  If it could be demonstrated that these asset values were deliberately inflated, it could allow the bank and Rangers’ other shareholders to “lift the corporate veil” and pursue individuals for any losses in the event that HMRC succeeds in having the full amount of its tax assessments against Rangers crystallize.

Individuals afraid of this type of legal manoeuvring might be tempted to start placing their assets in offshore trusts.

Remind you of anyone?